The New York capacity market, orchestrated by the The New York Independent System Operator (NYISO), is a critical component of the state’s energy landscape. This intricate market ensures that utilities and retail electric providers have access to reliable capacity resources to meet peak demand while maintaining grid stability. Â
In this comprehensive guide, we’ll unravel the complexities of the New York capacity market, providing you with a deep understanding of its inner workings and the strategies to optimize your participation.Â
NYISO market overviewÂ
Like other Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs), NYISO does not generate electricity nor does it own transmission lines. Rather, it coordinates with power producers, utilities, and other stakeholders to ensure the state’s electric grid meets the current and future electricity demands of nearly 20 million New Yorkers. Â
The current iteration of NYISO was formed in 1999, but its roots go back to the mid-1960s. To ensure grid reliability after the Northeast Blackout of 1965, which plunged nearly 30 million people in the northeastern U.S. and Canada into darkness, seven investor-owned utilities in the state formed the New York Power Pool (NYPP). Â
In 1997, following the Federal Energy Regulatory Commission’s (FERC) restructuring of the energy industry, the NYPP filed a request to become an independent system operator. That application was approved and NYISO took control of the state’s electric power system in 1999.   Â
Today, NYISO operates a wholesale energy market as well as a capacity market, which it calls the Installed Capacity (ICAP) market.Â
NYISO capacity market explained
In New York, NYISO and all market participants must comply with grid reliability rules established by the New York State Reliability Council (NYSRC). Among the rules developed by the not-for-profit entity are the resource adequacy and Installed Reserve Margin (IRM) requirements for the state. In other words, the NYSRC quantifies the minimum capacity needed to meet forecasted peak demand (resource adequacy) plus the minimum level of additional capacity required (IRM) to maintain grid reliability.Â
NYISO’s Installed Capacity market ensures utilities and other retail electric providers can meet the NYSRC’s requirements by holding competitive auctions. During these auctions, market participants procure the capacity resources needed to reliably meet peak demand in a cost-effective manner, from participants that have excess resources. Supply for the ICAP market typically comes from traditional generators, but can also include demand response programs, battery energy storage systems, solar, wind, and other renewable energy sources.Â
NYISO hosts seasonal auctions twice a year — one for the summer capability period, which runs from May through October, and one for the winter capability period that spans November through April. Supply resources are listed from lowest to highest cost, with demand significantly impacting price — the higher the demand the greater the volume of higher-priced resources must be purchased. Â
Market participants can also participate in NYISO’s monthly spot auctions to help meet demand or make up for unexpected generator outages. Â
Optimizing NYISO capacity market participationÂ
PCI Energy Solutions provides optimized tools to help manage your organization’s participation in NYISO’s capacity market. Learn more about how we can support your NYISO engagement through superior analytics and timely insight into the key drivers of profitability.